ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, C.R. BUILDING vs. ASR MARKET VENTURES PRIVATE LIMITED, DELHI

ORDER PER BRAJESH KUMAR SINGH, AM,

This appeal by the Revenue is directed against the order of the National Faceless Appeal Centre (in short ‘NFAC’), Delhi, dated 07.08.2023 pertaining to Assessment Year 2016-17.

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that section 56(2)(viib) of the Act is not applicable to the assessee's case in view of para no. 4 of the Notification GSR 127(E) dated 19.02.2019, without considering the scope given vide para no. 6 of the abovementioned Notification, wherein it has been clarified that, para no. 4 is not applicable to the shares in respect of which an addition made us 56(2)(viib) of the Act has been made in an assessment order made under the Act before the date of issue of Notifications.

2. On the facts and in the circumstances of the case. the Ld. CIT(A) has erred in the light of para no. 6 of the Notification GSR 127(B) dated 19.02.2019 as the assessment order making an addition of Rs. 1,84,86,525/- under section 56(2)(viib) was passed on 28.12.2018, whereas the date of issue of Notification is 19.02,2019, Hence, para no. 4 of the Notification based on which the Ld. CIT(A) has given relief to the assessee is not applicable to this assessee's case as the assessment order was passed before the date of notification.

3.1. In this case, the AO passed assessment order u/s 143(3) of the Act dated 28.12.2018 making an addition of Rs.1,84,86,525/- u/s 56(2)(viib) of the Act. According to the assessee, the addition was made on the following grounds:-

‘The Valuation Report submitted by the Assessee could not be relied upon because the Valuation Report prepared by the Valuer Firm was based on facts and figures, as well as profits/receipts, provided by the management to the Valuer Firm. Additionally, the Assessee did not apply for registration with DPIIT to be recognized as a startup and hence exemption under Section 56(2) (viib) of the Act would not be exempted. The Assessee, aggrieved by the Assessment Order dated 28.12.2018 passed by the Ld. AO, preferred an appeal before the Commissioner of Income Tax (Appeals) ('CIT(A)').”

The Ld. DR also agreed with the submission of the Ld. AR.

“4. The clarification issued on 9th August, 2019 provided that the provisions of the section 56(2)(viib) of the Act shall also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Startups has filed declaration in Form No.

2. The following procedure is laid down with regard to addition made under section 56(2)(viib) of the Act in assessment order passed before 19th February, 2019:— i. In case the appeal against the assessment is pending before the Commissioner of Income-tax (Appeal) [CIT(A)], the appellate order should be passed by CIT(A) on or before 31st December, 2019 after taking into account the fact that the Startup has filed declaration in Form No. 2 and hence the provisions of section 56(2)(viib) of the Act are not applicable for the addition made under section 56(2)(vib) of the Act before February, 2019. The Department shall not file further appeal on the issue of addition made under section 56(2)(viib) of the Act; ii. In case the case is pending before the ITAT, the Department shall not pres the ground relating to addition under section 56(2)(viib) of the Act in these cases.’ 9. Further, the assessee has also filed Form No.2, which is reproduced as under:-

Order pronounced in the open court on 31st May, 2024.